Cash Deals

An incentive that a seller offers to a buyer in return for paying a bill owed before the scheduled due date. The seller will usually reduce the amount owed by the buyer by a small percentage or a set dollar amount. If used properly, cash discounts improve the days-sales-outstanding aspect of a business's cash conversion cycle.

For Example, a typical cash discount would be if the seller offered a 2% discount on an invoice due in 30 days if the buyer were to pay within the first 10 days of receiving the invoice.

Providing a small cash discount would be beneficial for the seller as it would allow him to have access to the cash sooner. The sooner a seller receives the cash, the earlier he can put the money back into the business to buy more supplies and/or grow the company further.

All-cash mergers and acquisitions occur with no exchange of stock; the parent company purchases a majority of the common shares outstanding of the target company using only cash. This mostly occurs when the purchasing company is much larger than the company it is buying.

An all-cash real estate transaction occurs with no buyer financing. There may be significant drawbacks to paying cash for real estate, including tax consequences resulting from no mortgage interest tax deduction or the loss of earning power on the money that is tied up in the purchase

The cash purchase of a target company. When an all-cash deal occurs, the equity portion of the parent company's balance sheet remains unchanged. This is opposed to a all-stock deal, where equity on the balance sheet would be affected.

The transfer of a real estate property without financing or mortgages. The buyer would produce the appropriate funds at the time of closing; the seller would receive the entire selling price at closing.

It is always better to review the specific cash flows that will change due to the result specific management decision to see if it culminates in the positive incremental cash flows as well. When To Use The Discounted Cash Flow And The Future Cash Flow? For the more accurate evaluation of the asset or the business, the discounted cash flow seems to be the most suitable one. A discounted cash flow analysis is actually performed to project the current value of the future cash flows. The current year of operations is usually taken into consideration to determine the net operation value. That year is carried forward for the holding years. Each of those years are included and added together and then discounted at a random rate resulting in the risks that are linked with the collection of the future cash flows. This calculation in fact helps in providing the total existing worth of the cash flow. Homework help says if the discounted rate results in providing a value that are greater than the initial equity, the deal is considered to be a positive one.

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